In general, commodity items are fungible in that market participants will freely exchange one such item for another such item, since any differences between the two items are immaterial. As just an example, shares of a particular stock are fungible, since participants will (transactions costs, tax consequences, and other ancillary issues aside) sell and later repurchase a number of shares without regard to the identity of the actual shares being traded. In contrast, non-commodity items are non-fungible in that market participants will not freely exchange one such item for another, since the differences between the two items are material. For example, houses are non-fungible. Even two houses with identical structures, appearances, and lot sizes generally cannot be entirely equivalent, since they must necessarily have different locations.
Where considerations external to the actual identity of items make otherwise fungible items non-fungible, the considerations may be normalized to make such items essentially fungible as quasi-commodities. As an example, although sugar is inherently fungible as an item, two shipments of sugar delivered on different days and at different locations will generally not be treated identically in the marketplace. By normalizing according to the delivery date and location, however, the sugar may be made fungible since shipments of sugar delivered on the same day and at the same location will be treated identically in the marketplace.
A difficulty in marketplaces in which non-fungible items are traded is lack of liquidity with respect to these non-fungible items. For example, in a marketplace for component parts used in manufacturing, there may be a large number of parts available for purchase but a very low trading volume for at least some of the parts (typically the parts that are non-fungible). If the last trade involving a particular part occurred three months ago, and market conditions have changed appreciably in the interim, how are market participants to determine a current fair market price for the part? Inability to readily determine fair market pricing information for non-fungible items may prevent sellers of such items from providing meaningful and substantially real-time quotes to buyers, erode confidence of buyers in the market for such items, and otherwise inhibit trading with respect to such items. As a result of any of these or other disadvantages, prior pricing techniques for non-fungible items have been inadequate in many electronic marketplace and other electronic commerce environments.